Loxley - OSK

RHB Research 06 Mar 2013
FAVOURABLE OUTLOOK FOR TRADING BUSINESS
Construction materials trading division to benefit from construction boom. Currently, the
backlog for its construction materials trading division stands at THB2.74bn, most of which comes
from mass transit-related projects. As a leading construction materials trading company in
Thailand, Loxley is expected to reap benefits from a booming construction sector in Thailand as well
as the expansion of the mass transit routes in the Greater Bangkok region. Apart from the domestic
construction materials market, it has also cast its sights on the opportunities in supplying
construction materials to tap into the construction boom in Myanmar.
Bringing Thai brands to China. Loxley’s China office has been helping Thailand’s small and
medium enterprises (SMEs) to introduce their products to the Chinese market. As it is not very
cost-effective for Thai SMEs to self-market their products overseas, Loxley provides the distribution
channels by leveraging on its existing network in China. To further tap into the vast Chinese
market, it plans to set up booths marketing Thai products in petrol stations in China by this year.
As such, Loxley is expected to sign a co-operative agreement with Sinopec to create a “Thai corner”
in the latter’s petrol stations in China. The booths will sell products from both Loxley and Thai
SMEs. As Sinopec has over 10,000 petrol stations located across four provinces and two cities in
China, we think the co-operation with Sinopec will widen Loxley’s distribution network in China.
Figure 12: Sinopec’s petrol stations network in China
Source: Loxley
UNLOCKING VALUE VIA LISTING ITS SUBSIDIARY
Over the next five years, Loxley is likely to list some of its subsidiaries if they show attractive
enough profits. This is an incentive for the company to improve its cost-saving measures, or it may
have to raise more working capital to adequately partake in the array of opportunities available. We
do not rule out the possibility that the listing process might begin by end-FY13. Two of Loxley’s
subsidiaries, Loxley Wire Company (LWC) and LOXBIT, are the prime candidates for listing on the
SET.
Loxley Wireless Company
Loxley Wireless is a 99%-held subsidiary. We believe that this company is a prime candidate for
listing on the SET. Loxley actually has several potential candidates to be floating on the stock
market, and is likely to follow the same path as Samart in listing its business units are that deemed
practical in unlocking value for providing an additional catalyst for its share price.
LWC’s business is divided into three main areas:
i) Distribution of carrier-grade equipment by Huawei and Alcatel-Lucent as well as Aastra’s
enterprise product, e.g. PABX including installation and after-service.
2) Distribution of wireless transmission and networking hardware such as radio frequency repeaters
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